Mitochondrial and peroxisomal fatty acid oxidation were compared in whole liver homogenates. Oxidation of 0.2 mM palmitoyl-CoA or oleate by mitochondria increased rapidly with increasing molar substrate:albumin ratios and became saturated at ratios below 3, while peroxisomal oxidation increased more slowly and continued to rise to reach maximal activity in the absence of albumin. Under the latter condition mitochondrial oxidation was severely depressed. In homogenates from normal liver peroxisomal oxidation was lower than mitochondrial oxidation at all ratios tested except when albumin was absent. In contrast with mitochondrial oxidation, peroxisomal oxidation did not produce ketones, was cyanide-insensitive, was not dependent on carnitine, and was not inhibited by (+)-octanoylcarnitine, malonyl-CoA and 4-pentenoate. Mitochondrial oxidation was inhibited by CoASH concentrations that were optimal for peroxisomal oxidation. In the presence of albumin, peroxisomal oxidation was stimulated by Triton X-100 but unaffected by freeze-thawing; both treatments suppressed mitochondrial oxidation. Clofibrate treatment increased mitochondrial and peroxisomal oxidation 2- and 6- to 8-fold, respectively. Peroxisomal oxidation remained unchanged in starvation and diabetes. Fatty acid oxidation was severely depressed by cyanide and (+)-octanoylcarnitine in hepatocytes from normal rats. Hepatocytes from clofibrate-treated rats, which displayed a 3- to 4-fold increase in fatty acid oxidation, were less inhibited by (+)-octanoylcarnitine. Hydrogen peroxide production was severalfold higher in hepatocytes from treated animals oxidizing fatty acids than in control hepatocytes. Assuming that all H2O2 produced during fatty acid oxidation was due to peroxisomal oxidation, it was calculated that the contribution of the peroxisomes to fatty acid oxidation was less than 10% both in cells from control and clofibrate-treated animals.